Generally speaking one expects our politicians regardless of political color to do their very best for all sectors of the population. Not so in Ohio. Yesterday the Republican heavy Ohio Senate voted to change the Payday Loan industry. And change it in such a fashion that the vast majority of the 1600 or so Payday Loan businesses in the state will be forced to close their doors resulting in 6,000 people losing their jobs.

This new law, that governor Ted Strickland is expected to ‘rubber stamp’ later this month limits the APR of short term loans to 28%. This makes it uneconomical for the Payday Loan purveyors. You cannot survive making a loan of $100 and only getting a few cents for your trouble. A great explanation of the economics of the industry was given to me by Lawrence Meyers.

The loss of 6,000 jobs is only the tip of the iceberg though. By killing the industry the Republicans have now started a domino effect that will have disastrous results on the working poor. Thousands upon thousands of Ohioans live pay check to pay check with no financial cushion for unexpected problems, the Payday Loan offered a life raft for those emergency situations. Where will they go now? They have no credit cards, they have no leverage with their bank, they are, as we would say ‘screwed’!

One of the arguments put forward is that the Payday Loan industry creates an environment that creates chronic borrowing. A situation where you have to borrow because you have to cover the loan you just paid off. Playing devils advocate for a moment, lets assume that 25% of borrowers fall into that category. I have no idea how many people that would equate to in Ohio, but I would guess it would be in the thousands.

When Ted puts his monika on this ridiculous bill what happens to these people? Suddenly they can’t pay the rent, can’t afford to take their child to the doctor, can’t afford their medication, can’t afford to buy groceries, etc, etc.

I will tell you what will happen, they will lose there homes and apartments, and they will join the increasing number of homeless. Once they are homeless they will lose their job. When they have lost their job they will become a huge burden on the state.

Oh, and do not think for one moment that I am exaggerating, for the past 6 years I have worked in a very large homeless shelter, one that provides accommodations for 1,100 people nightly. I understand this economic cycle all too well, and it is vicious and inescapable. I just hope that Ted Strickland has budgeted for the economic strife he is about to unleash on Ohio.

Ohio is predominantly Republican, but McCain had better watch out, I suspect that few of the working poor will be putting a check mark next to his name if this legislation goes through.

3 users commented in " Ohio Republicans Vote For Layoffs And Strife "

As far as I understand, our blogger Simon Barret used to have an opinion that payday lending was bad for Ohioans (“Some people refer to Payday Loans as legalized loan sharking, and indeed it does seem that way.” from his previous blog posted on April 30th, 2008, and May 1st, 2008)

It seems to me he had an open mind as to what are the facts. And after examining the facts and after learning about the indeustry (his blog May 12th, 2008 Interview with Lawrence Meyers), he realized what is the reality and what is the ramifications of passing a bad law.

Yes, it is too bad that our politicians did not have an open mind, and all they cared about was their political advantage. Ohio Republican representatives and senators, you did not care about working people. Ohio Democratic representatives and senators, you may like this bill because this bill will create more poor people, and you will have more people that you claim that you are going to fight for.

But all the politicians, please do not think we are so stupid. Beware of Ohioans. We will pay you back with whatever you gave us.

Those elitist journalists and self-appointed consumer advocates, who are you going to blame this time when the cascade effects cause hard working people to suffer more? You don’t even have a simple understanding of how economy works. And you guys are very good at pushing left-wing agenda. One day you will be looking back and say, “I screwed up hard working people of Ohio.” But I doubt that you have conscience to admit that you were wrong.

Kudos to Simon Barrett for realizing and pointing out the plain truth and the hard reality still to come for Ohioans.

Marc said,

in May 20th, 2008 at 10:34 pm

I think the interview needs to be read again, with proper mathematical perspective. The language employed by Mr. Meyers is misleading and needs clarification, lest his point is taken wrong.

“A 28% APR rate cap means 28% divided by 26, or 1.07% every two weeks. That’s $1.07 per hundred instead of $15 per hundred. That is a 93% revenue cut.”
-actually, it is about a 28% reduction in revenue, I’m not sure what kind of percentages he is referring to, I am referring to the kind that means “parts per hundred”.

“Revenue collected drops to $750 every two weeks!”.
This may be a typo, but I see revenue dropping to $7457.

“Against that revenue, they lose that $5300 in defaults, and spend about $9000 on overhead, or $14,300 total. So their net profit for the month (before owner salary and taxes!) is $6,700.”
-Why the author keeps mixing monthly and bi-weekly data is beyond me. If they cannot trim their budgets and operate more profitably, or find a way to lower the percent defaulting on their loans, perhaps we are better without these businesses, which do little to help the overall economy, and make way for a business that actually produces a tangible good or service, instead of another way of skimming the till. Don’t argue to me how important this service is to the working poor, it is loan sharking at it’s best. People are not “suddenly” unable to pay the rent, it happens every month. Burying yourself 2 weeks deeper is not going to save you for long.

Marc said,

in May 20th, 2008 at 10:38 pm

Oh yes,almost missed it, the $5300 in losses is shown as a monthly expense, but in fact, the $5300 is the 7% default for the whole YEAR.(about $450 per month)

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